ECB's Praet Says Emergency Liquidity Funding Only Temporary Facility

(RTTNews) - The emergency liquidity funding is a temporary facility and it would be given only to solvent banks and not to countries, European Central Bank Executive Board member Peter Praet said.

Emergency liquidity assistance (ELA) can only be temporary and can be given only to solvent banks, he said in an interview with Portuguese newspaper Jornal de Negocios. "When you have a systemic crisis, you may need flexibility in terms of duration."

Asked if a country is cut off from ELA, would it be cut out of the monetary union, Praet said ELA is provided to banks, not to countries.

"I will not comment on speculative scenarios," Praet said. "We are not in that situation."

The ECB suspended the waiver on government debt to be accepted as collateral, but Greek banks are still counterparties. When they have insufficient eligible collateral for monetary policy, they will have access to ELA, he said.

Further, Praet said Europe has weak institutions to deal with the crisis. The ECB was asked to participate in discussions on the financial assistance programmes in liaison with the European Commission, he added.